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Foreclosure Prevention
Program That Works:
Pennsylvania Leads The
Nation
Program That Works:
Pennsylvania Leads The
Nation
The federal government's Home Affordable
Modification Program is still creeping along on two
cylinders and not speeding on eight as promoted and
promised. If the Republicans have their way the plug
would be pulled on HAMP immediately. But the
answer for a successful program lies in Pennsylvania.
Pennsylvania's foreclosure prevention plan is called
Homeowners' Emergency Mortgage Assistance
Program (HEMAP). This unique plan was signed into
law in 1983 and it is the only one of its kind in the
country. The program gives the lender and the
borrower the assurance that there will be a steady
flow of mortgage payments. The program is funded
by State appropriations and the repayment of current
HEMAP loans. The emphasis is on loans. These are
loans that have to be repaid. They are not grants.
When a homeowner is approved for HEMAP
assistance, a loan is created. The security for the
loan is the property facing foreclosure. The loan
brings the delinquent payments current. There are
two types of assistance available to the homeowner
depending on his or her income and financial
situation: continuing mortgage assistance loans and
non–continuing mortgage assistance loans.
In a non–continuing mortgage assistance loan, the
mortgage is brought current to a specified date and
the homeowner is responsible for making all
subsequent monthly mortgage payments to his or her
lender along with a monthly payment to HEMAP. The
homeowner may also be required to make a cash
contribution toward the mortgage delinquency at the
time the HEMAP loan closes.
If the homeowner qualifies for and is given the
continuing mortgage assistance loan, the mortgage is
brought current to a specified date and then HEMAP
subsidizes the monthly mortgage payment to the
lender.
The interest rate on the loan for 2011 is set at 5.25%
and the term is a maximum of 24 months. The
maximum amount is $60,000. HEMAP has very flexible
terms and the minimum monthly payment is $25.
A New York Fed study shows that the HEMAP plan is
cheaper for taxpayers and can help a larger number
of troubled homeowners. It compares the two
approaches by evaluating costs on assistance for two
hypothetical mortgages valued at $210,000 at the
time of unemployment. The HAMP modification
program, the report argues, costs the federal
government $13,600 while the HEMAP program cost
Pennsylvania $1,620. The study goes on to say that
about 80% of homeowners who used HEMAP retained
ownership of their homes.
Why hasn't the federal government noticed the
success of HEMAP and tried to encourage the spread
of the program? We might never get the answer, but
four states — Connecticut, Delaware, Idaho and
Maryland — are operating programs similar to
HEMAP.
Modification Program is still creeping along on two
cylinders and not speeding on eight as promoted and
promised. If the Republicans have their way the plug
would be pulled on HAMP immediately. But the
answer for a successful program lies in Pennsylvania.
Pennsylvania's foreclosure prevention plan is called
Homeowners' Emergency Mortgage Assistance
Program (HEMAP). This unique plan was signed into
law in 1983 and it is the only one of its kind in the
country. The program gives the lender and the
borrower the assurance that there will be a steady
flow of mortgage payments. The program is funded
by State appropriations and the repayment of current
HEMAP loans. The emphasis is on loans. These are
loans that have to be repaid. They are not grants.
When a homeowner is approved for HEMAP
assistance, a loan is created. The security for the
loan is the property facing foreclosure. The loan
brings the delinquent payments current. There are
two types of assistance available to the homeowner
depending on his or her income and financial
situation: continuing mortgage assistance loans and
non–continuing mortgage assistance loans.
In a non–continuing mortgage assistance loan, the
mortgage is brought current to a specified date and
the homeowner is responsible for making all
subsequent monthly mortgage payments to his or her
lender along with a monthly payment to HEMAP. The
homeowner may also be required to make a cash
contribution toward the mortgage delinquency at the
time the HEMAP loan closes.
If the homeowner qualifies for and is given the
continuing mortgage assistance loan, the mortgage is
brought current to a specified date and then HEMAP
subsidizes the monthly mortgage payment to the
lender.
The interest rate on the loan for 2011 is set at 5.25%
and the term is a maximum of 24 months. The
maximum amount is $60,000. HEMAP has very flexible
terms and the minimum monthly payment is $25.
A New York Fed study shows that the HEMAP plan is
cheaper for taxpayers and can help a larger number
of troubled homeowners. It compares the two
approaches by evaluating costs on assistance for two
hypothetical mortgages valued at $210,000 at the
time of unemployment. The HAMP modification
program, the report argues, costs the federal
government $13,600 while the HEMAP program cost
Pennsylvania $1,620. The study goes on to say that
about 80% of homeowners who used HEMAP retained
ownership of their homes.
Why hasn't the federal government noticed the
success of HEMAP and tried to encourage the spread
of the program? We might never get the answer, but
four states — Connecticut, Delaware, Idaho and
Maryland — are operating programs similar to
HEMAP.
| Boston Community Capital to the rescue: Homeowners get a second chance to keep their foreclosure homes |
